JOSEPHINE L. STATON, District Judge.
PLEASE TAKE NOTICE THAT that pursuant to 28 U.S.C. §754 Temporary Receiver Robert P. Mosier ("Mosier") for Security and Exchange Commission v. Capital Cove Bancorp LLC, Christopher M. Lee aka Rashid K. Khalfani, Central District of California, Southern Division, Case No. CV15-00980-JLS (JCx) is required to file the complaint and the order in each district. The Temporary Receiver is requesting a miscellaneous case number to be filed in your district. The original certified copy of the complaint is attached hereto as Exhibit "1" and Temporary Restraining Order and Order to Show Cause Why a Preliminary Injunction Should Not Be Granted is attached hereto as Exhibit "2".
Plaintiff Securities and Exchange Commission (the "SEC") alleges as follows:
1. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d)(1) and 22(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77t(b), 77t(d)(1) and 77v(a); Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §§ 78u(d)(1), 78u(d)(3)(A), 78u(e), and 78aa; and Sections 209(d)-(e) and 214 of the Investment Advisers Act of 1940 ("Advisers Act"), 15 U.S.C. §§ 80b-9(d)-(e) and 80b-14.
2. Defendants have, directly or indirectly, made use of the means or instrumentalities of interstate commerce or of the mails, in connection with the transactions, acts, practices and courses of business alleged in this Complaint.
3. Venue is proper in this district pursuant to Section 22(a) of the Securities Act, 15 U.S.C. § 77v(a); Section 27 of the Exchange Act, 15 U.S.C. § 78aa; and Section 214 of the Advisers Act, 15 U.S.C. § 80b-14, because certain of the transactions, acts, practices and courses of conduct constituting violations of the federal securities laws occurred within this district. In addition, venue is proper in this district because both defendants reside in this district.
4. This is an action brought to halt an ongoing offering fraud by defendant Capital Cove Bancorp LLC ("CCB"), formerly an SEC-registered investment adviser, and defendant Christopher M. Lee, alias Rashid K. Khalfani ("Lee"), CCB's founder, owner, managing partner, chief compliance officer and sole control person (collectively with CCB, "Defendants"). Defendants raised at least $1.9 million from over fifteen U.S. investors over a two-year period by falsely claiming to invest proceeds in distressed real estate when in fact, they misappropriated investors' money. To date, Defendants have misappropriated 94% of the nearly $2 million invested with them.
5. To effectuate their scheme, CCB and/or Lee formed two private investment funds, the Rittenhouse Square Trust, LLC (the "Rittenhouse Fund"), and the Capital Cove REO Opportunities Fund II, LLC (the "REO Fund II") (collectively, the "Funds"), purportedly to invest in real estate for investors. Yet the Funds held no real estate for investors as CCB and Lee had promised; instead, Defendants pocketed the investors' money or used it to buy real estate for themselves. CCB and Lee made multiple misrepresentations to entice investors to invest with them, including falsely boasting online and in printed marketing materials that the Fund was "vetted, qualified and registered" with the SEC and several other government and regulatory agencies, and administered by a third-party. Further, Defendants touted Lee's qualifications while soliciting investors, but never disclosed his criminal record, including his conviction for felony grand theft.
6. Defendants are continuing to solicit investors for the REO Fund II. In the last two weeks, Lee solicited an undercover FBI agent to invest in the Fund, providing him marketing materials, a private placement memorandum, and wiring instructions to invest in the REO Fund II. Defendants are running print advertisements in a local weekly paper, and appearing at investment conferences where their promotional materials tout investment opportunities in their REO funds. Lee appeared at one such investment conference on June 10, 2015, and advertised that he will appear at another one on June 20, 2015 in Santa Barbara, California.
7. Defendants also offered and sold membership interests in the REO Fund II without registering those transactions or securities with the SEC and with no applicable exemption from registration.
8. During its time as an SEC-registered investment adviser, CCB also filed numerous Forms ADV containing materially false statements and omissions.
9. The membership interests in the Funds that Defendants offered and sold in the Funds are securities under the federal securities laws.
10. In offering and selling these securities to U.S. investors, Defendants, acting with scienter, made material misrepresentations and omissions as to the uses of investors' monies, the Funds' characteristics, and Lee's criminal record. By this conduct, Defendants have violated and are violating the antifraud provisions of Section 17(a) of the Securities Act, 15 U.S.C. § 77q, and Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder.
11. Defendants offered and sold the REO Fund II securities to U.S. investors in unregistered transactions, with no available exemption from registration. In doing so, Defendants have violated and are violating the registration provisions of Sections 5(a) and 5
12. In willfully filing materially false Forms ADV with the SEC, Defendants violated Section 207 of the Advisers Act, 15 U.S.C. §80b-7.
13. CCB and Lee registered CCB as an investment adviser with the SEC without having at least $25 million in assets under management, and continued to have CCB registered with the SEC until January 2014 without ever having $25 million in assets under management. In doing so, CCB violated, and Lee aided and abetted CCB's violation of, Section 203A of the Advisers Act, 15 U.S.C. §80b-3A.
14. The SEC seeks a temporary restraining order and preliminary and permanent injunctions prohibiting future such violations and prohibiting Defendants from soliciting, accepting or depositing any investor monies; an order freezing Defendants' assets, appointing a temporary receiver, providing for expedited discovery, requiring preservation
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17. On or about December 9, 2013, Lee purported to change the name on his social security card from Christopher Mark Lee to Rashid Khalid Khalfani.
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23. Since March 2012, Defendants have raised about $1.9 million from more than fifteen U.S. investors through unregistered securities offerings of two private investment funds, the Rittenhouse Fund and the REO Fund II. Defendants' solicitations of investors for the REO Fund II are ongoing.
24. CCB purports to be a real estate and investment services firm focused primarily on real estate-owned properties (i.e., properties owned by a lender as a result of foreclosure).
25. Beginning in 2012, CCB touted real estate investment opportunities for the REO Fund II on its website,
26. To invest in the REO Fund II, Defendants directed investors to open accounts at third-party custodians (primarily custodians for self-directed IRAs), from which Defendants could invest the monies in "Class A membership interests" in either Fund, pursuant to subscription agreements that Lee counter-signed under the alias Khalfani. CCB and Lee then transferred investors' monies from the selfdirected IRA accounts to bank accounts in the name of the respective Funds (or, in some instances, directly to the accounts of CCB and CCI). Investors were promised returns on their investments in these membership interests in the Funds, and that these returns would be predicated on the Funds' investing in real estate.
27. CCB's website and the marketing flyer falsely stated that: (1)theREO Fund II had been "vetted, qualified and registered by the BRE, FDIC, HUD, FINRA, SEC and other government agencies and corporate entities to purchase discounted loans, foreclosure real estate and REO assets directly"; (2) the REO Fund II had a third-party administrator; and (3) CCB was an "SEC-registered Fund Manager" and "FINRA member."
28. From March 2012 to January 2014, Defendants raised at least $1,933,500 from at least 17 investors, as follows:
29. Of the approximately $1,933,500 raised for the Funds between March 2012 to January 2014, Defendants misappropriated $1,812,143, or 94%, as follows:
30. Thus, while Defendants used approximately $397,368 of the Funds' monies to purchase three properties, they purchased those properties in CCB's name, not the Funds' names. Of the three properties, Defendants subsequently sold two, but none of the sales proceeds were ever deposited into either Fund's known bank accounts.
31. Defendants deposited approximately $346,000 of the REO Fund IPs monies into the bank and brokerage accounts of CCB and CCI, rather than into the Fund's accounts.
32. Defendants transferred approximately $325,500 of the Funds' monies to accounts Lee controlled for Aspyration and CCI.
33. Defendants transferred approximately used $657,767 of the Funds' monies for CCB's genera] business operations.
34. Lee had sole control over all of the Funds', CCB's, CCI's, and Aspyration's bank and brokerage accounts during the relevant period, and was the sole authorized signatory for these accounts.
35. Defendants' representations concerning the intended use of investors' monies were materially false and misleading. In fact, investors' monies were not used to purchase distressed real estate through or in the name of the two Funds. Instead, Defendants used investor funds to purchase real estate in CCB's name; to continue their own business operations, and for Lee's personal benefit.
36. Beyond misstating the intended use of the Funds' proceeds, Defendants made other materially false and misleading statements and omissions in soliciting investors for the REO Fund II.
37. First, on CCB's website and in the marketing flyer Lee gave to investors, Defendants falsely stated that: (1) the REO Fund II "has been vetted, qualified and registered by the BRE, FDIC, HUD, FINRA, SEC and other government agencies and corporate entities to purchase discounted loans, foreclosure real estate and REO assets directly"; (2) a third party entity was the Fund's administrator; and (3) CCB was an "SEC-registered Fund Manager" and "FINRA member." None of these statements were true.
38. Second, on CCB's website and in the marketing flyer, Defendants solicited investors for the REO Fund II by touting the qualifications and expertise of the "Fund Managers," which included Lee, aka Khalfani. Yet Defendants omitted Lee's record of criminal convictions.
39. Defendants' representations concerning CCB's and the REO Fund II's characteristics and Lee's credentials were materially false and misleading. In fact, the REO Fund II was neither "vetted, qualified or registered by" any government agency nor administered by any third-party, and Lee had an extensive criminal record that he concealed from investors.
40. Lee knew, or was reckless or negligent in not knowing, that these misrepresentations and omissions were false and misleading when made.
41. Defendants did not register with the SEC any of the transactions or securities they offered or sold for either Fund.
42. For the REO Fund II, CCB and Lee engaged in the offer and sale of the Fund's membership interests without registering those transactions or securities with the SEC, and the offers and sales were not exempt from registration.
43. While the subscription agreements for the REO Fund II state that it was offered only to accredited investors, at least seven actual investors were unaccredited.
44. In soliciting investors, Defendants failed to inquire regarding the investors' financial condition or sophistication; failed to provide copies of the Fund's private placement memorandum; and failed to provide financial information about the Fund or CCB.
45. Defendants' solicitations for the REO Fund II are ongoing:
46. By his actions described herein, in addition to directly selling REO Fund II membership interests to investors, and being a sponsor, organizer and manager of the REO Fund II, Lee was a necessary participant and a substantial factor in the offer and sale of the REO Fund II.
47. From November 26,2010, when CCB and Lee first filed CCB's application to register as an investment adviser with the SEC, through December 2013, CCB's Forms ADV repeatedly contained false and misleading statements, including:
48. These false and misleading statements and omissions appeared in the following Form ADV filings:
49. These statements in CCB's Forms ADV were materially false and misleading because: (1) Khalfani was not Lee's legal name; (2) CCB fabricated, by a factor of at least ten, the amount of its assets under management; (3) CCB failed to disclose Lee's guilty pleas to felony grand theft in 2004 and to misdemeanor forgery in 2013; and (4) CCB's counsel did not sign or review any of the Forms ADV.
50. Lee, as CCB's founder, 100% owner, managing partner, chief compliance officer and sole control person, and as a signatory and/or person with responsibility for the filing of CCB's Forms ADV, over which he had ultimate authority, willfully misrepresented these material facts from CCB's ADVs filed in 2010-2013.
51. These misrepresentations were material because they were required disclosures in the Forms ADV.
52. The SEC realleges and incorporates by reference paragraphs 1 through 51 above.
53. The membership interests in the REO Fund II that were offered and sold to U.S. customers as alleged herein constitute "securities" as defined by the Securities Act and the Exchange Act.
54. Defendants, by engaging in the conduct described above, directly or indirectly, singly and in concert with others, made use of the means or instruments of transportation or communication in interstate commerce, or of the mails, to offer
55. By engaging in the conduct described above, Defendants violated, and unless restrained and enjoined, will continue to violate, Section 5
56. The SEC realleges and incorporates by reference paragraphs 1 through 51 above.
57. Defendants, and each of them, by engaging in the conduct described above, directly or indirectly, in the offer or sale of securities by the use of means or instruments of transportation or communication in interstate commerce or by use of the mails:
58. By engaging in the conduct described above, Defendants violated, and unless restrained and enjoined, will continue to violate, Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a).
59. The SEC realleges and incorporates by reference paragraphs 1 through 51 above.
60. Defendants, by engaging in the conduct described above, directly or indirectly, in connection with the purchase or sale of a security, by the use of means or instrumentalities or interstate commerce, of the mails, or of the facilities of a national securities exchange, with scienter:
61. By engaging in the conduct described above, Defendants violated, and unless restrained and enjoined, will continue to violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
62. The SEC realleges and incorporates by reference paragraphs 1 through 51 above.
63. Section 207 of the Advisers Act, 15 U.S.C. §80b-7, provides that it is unlawful for any person willfully to make any untrue statement of
64. As set forth above, Defendants' filings on Forms ADV were materially false and misleading.
65. As a result. Defendants violated and, unless enjoined, will continue to violate Section 207 of the Advisers Act, 15 U.S.C. §80b-7.
66. The SEC realleges and incorporates by reference paragraphs 1 through 51 above.
67. Section 203A of the Advisers Act, 15 U.S.C. §80b-3a, provides that no investment adviser subject to state regulation and with assets under management of less than $25 million may register with the Commission as an investment adviser. Rule 203A-3(d), 17 C.F.R. § 275.203A-3, provides that "assets under management" means securities portfolios over which an investment adviser provides "continuous and regular supervisory or management services . . ."
68. As set forth above, Defendant CCB registered with the Commission without having at least $25 million in assets under management.
69. As a result, Defendants violated and, unless enjoined, will continue to violate Section 203A of the Advisers Act, 15 U.S.C. §80b-3a.
70. Lee aided and abetted CCB's violation and, unless enjoined, will continue to aid and abet CCB's violations, of Section 203A of the Advisers Act, 15 U.S.C. §80b-3a.
WHEREFORE, the SEC respectfully requests that the Court:
Issue findings of fact and conclusions of law that Defendants committed the alleged violations.
Issue orders, in a form consistent with Fed. R. Civ. P. 65(d), temporarily, preliminarily and permanently enjoining Defendants and their agents, servants, employees, and attorneys, and those persons in active concert or participation with any of them, who receive actual notice of the judgment by personal service or otherwise, and each of them, from violating Section 5(a) and (c) and Section 17(a) of the Securities Act, 15 U.S.C. §§ 77e(a), 77e(c) and 77q(a) and Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. §§ 240.10b-5; and issue an order permanently enjoining CCB and Lee from violating Sections 203A and 207 of the Advisers Act, 15 U.S.C. §§ 80b-3A and 80b-7.
Issue orders, in a form consistent with Fed. R. Civ. P. 65(d), temporarily, preliminarily and permanently enjoining Defendants and their agents, servants, employees, and attorneys, and those persons in active concert or participation with any of them, who receive actual notice of the judgment by personal service or otherwise, and each of them, from soliciting, accepting, or depositing any monies from actual or prospective investors in connection with any offering of securities pursuant to Section 20(b) of the Securities Act and Section 21(d) of the Exchange Act; provided, however, that such injunction shall not prevent CCB or Lee from purchasing or selling securities listed on a national securities exchange for their own personal accounts.
Issue in a form consistent with Fed. R. Civ. P. 65, a temporary restraining order and a preliminary injunction freezing the assets of Defendants CCB, Lee, the Rittenhouse Fund and the REO Fund II; prohibiting each of the Defendants from destroying documents; and ordering accountings by each of the Defendants, and the Rittenhouse Fund and the REO Fund II; and appointing a receiver over the Rittenhouse Fund, the REO Fund II and CCB.
Order Defendants to disgorge all ill-gotten gains from their illegal conduct, together with prejudgment interest thereon.
Order Defendants to pay civil penalties under Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d); Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3); and Section 209(e) of the Advisers Act, 15 U.S.C. §80b-9(e).
Retain jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that may be entered, or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.
Grant such other and further relief as this Court may determine to be just and necessary.
This matter came before the Court upon the Ex Parte Application for a Temporary Restraining Order and Order to Show Cause Why a Preliminary injunction Should Not Be Granted (the "TRO Application") filed by Plaintiff Securities and Exchange Commission ("SEC").
The Court, having considered the SEC's Complaint, the TRO Application, the supporting Memorandum of Points and Authorities, the supporting declarations and exhibits, and the other evidence and argument presented to the Court, finds that:
IT IS HEREBY ORDERED that the SEC's application for a Temporary Restraining Order and Order To Show Cause Why a Preliminary Injunction Should Not Be Granted against Defendants Capital Cove Bancorp LLC and Christopher M. Lee aka Rashid K. Khalfani is GRANTED.
IT IS FURTHER ORDERED that Defendants Capital Cove Bancorp LLC and Christopher M. Lee aka Rashid K. Khalfani, and their-officers, agents, servants, employees, attorneys, subsidiaries and affiliates, and those persons in active concert or participation with any of them who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are temporarily restrained and enjoined from, directly or indirectly, in the absence of any applicable exemption:
IT IS FURTHER ORDERED that Defendants Capital Cove Bancorp LLC and Christopher M. Lee aka Rashid K. Khalfani, and their officers, agents, servants, employees, attorneys, subsidiaries and affiliates, and those persons in active concert or participation with any of them, who receive actual notice of this-Order, by personal service or otherwise, and each of them, be and hereby are temporarily restrained and enjoined from, directly or indirectly, in the offer or sale of any securities, by the use of any means or instalments of transportation or communication in interstate commerce or by the use of the mails:
in violation of Section 17(a) of the Securities Act. 15 U.S:C. § 77q(a).
IT IS FURTHER ORDERED that Defendants Capital Cove Bancorp LLC and Christopher M. Lee aka Rashid K. Khalfani, and their officers, agents, servants, employees, attorneys, subsidiaries and affiliates, and those persons in active concert or participation with any of them, who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are temporarily restrained and enjoined from, directly or indirectly, hi connection with the purchase or sale of any security, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange:
in violation of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.
IT IS HEREBY FURTHER ORDERED that defendants Capital Cove Bancorp LLC and Christopher M. Lee aka Rashid K. Khalfani, and each of their agents, servants, employees and attorneys and those persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, including facsimile transmission, electronic mail, or overnight delivery service, are hereby prohibited from soliciting, accepting, or depositing any monies from actual or prospective investors in connection with any oifering of securities; provided, however, that such injunction shall not prevent CCB or Lee from purchasing or selling securities listed on a national securities exchange for their own personal accounts.
IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, Defendants Capital Cove Bancorp LLC and Christopher M. Lee aka Rashid K. Khalfani, and their officers, agents, servants, employees, attorneys, subsidiaries and affiliate, and those persons in active concert with them, who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are temporarilu permanently restrained and enjoined from, directly or indirectly, transferring, assigning, selling, hypothecating, changing, wasting, dissipating, converting, concealing, encumbering, or otherwise disposing of, in any manner, any funds, assets, securities, claims or other real or personal property, including any notes or deeds of trust or other interest in real property, wherever located, of any one of the Defendants, or their subsidiaries or affiliates, owned by, controlled by, managed by or in the possession or custody of any of them and from transferring, encumbering dissipating, incurring charges or cash advances on any debit or credit card of the credit arrangement of any one of the Defendants, or their subsidiaries and affiliates.
IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, an immediate freeze shall be placed on all monies and assets (with an allowance for necessary and reasonable living expenses to be granted only upon good cause shown by application to the Court with notice to and an opportunity for the SEC to be heard) in all accounts at any bank (including, without limitation, Bank of America and JP Morgan), financial institution or brokerage firm (including, without limitation, TD Ameritrade) or Internet or "e-commerce" payment processor, all certificates of deposit, and other funds or assets, held in the name of, for the benefit of, or over which account authority is held by Defendants Capital Cove Bancorp LLC and Christopher M. Lee aka Rashid K. Khalfani, as well as by the Rittenhouse Square Trust, LLC (the "Rittenhouse Fund"), and/or the Capital Cove REO Opportunities Fund II LLC (the "REO Fund II"), including but not limited to the accounts listed below:
IT IS FURTHER ORDERED that, except as otherwise ordered by this Court, each of the Defendants, and their officers, agents, servants, employees, attorneys, subsidiaries and affiliates, and those persons in active concert or participation with any of them, who receive actual notice of this Order, by personal service or otherwise, and each of them, be and hereby are temporarily restrained and enjoined from, directly or indirectly: destroying, mutilating, concealing, transferring, altering, or otherwise disposing of, in any manner, any documents, which includes all books, records, computer programs, computer files, computer printouts, contracts, emails, correspondence, memoranda, brochures, or any other documents of any kind in their possession, custody or control, however created, produced, or stored (manually, mechanically, electronically, or otherwise), pertaining in any manner to Defendants Capital Cove Bancorp LLC or Christopher M. Lee aka Rashid K. Khalfani, or to the Rittenhouse Fund or the REO Fund IL
IT IS FURTHER ORDERED that Defendants Capital Cove Bancorp LLC and Christopher M. Lee aka Rashid K. Khalfani, the Rittenhouse Fund, as well as the REO Fund II, within five days of the issuance of this Order, shall prepare and deliver to the SEC a detailed and complete schedule of all of their personal assets, including all real and personal property exceeding $5,000 in value, and all bank, securities, and other accounts identified by institution, branch address and account number. The accounting shall include a description of the sources of all such assets. Such accounting shall be filed with the Court and a copy shall be delivered to the SEC's Los Angeles Regional Office to the attention of Amy Jane Longo, Trial Counsel. After completion of the accounting, each of the Defendants shall produce to the SEC's Los Angeles Regional Office, at a time agreeable to the SEC, all books, records and other documents supporting or underlying their accounting.
IT IS FURTHER ORDERED that any person who receives actual notice of this Order by personal service or otherwise, and who holds, possesses or controls assets exceeding $5,000 for the account or benefit of any one of the Defendants or the Funds, shall within 5 days of receiving actual notice of this Order provide counsel for the SEC with a written statement identifying all such assets, the value of such assets, or best approximation thereof, and any account numbers or account names in which the assets are held.
IT IS FURTHER ORDERED that
IT IS FURTHER ORDERED that Defendant Capital Cove Bancorp LLC, its subsidiaries and affiliates, and the Funds, including all of the other entities in receivership, and their officers, agents, servants, employees and attorneys, and any other persons who are in custody, possession or control of any assets, collateral, books, records, papers or other property of or managed by any of the entities in receivership, shall forthwith give access to and control of such property to the temporary receiver.
IT IS FURTHER ORDERED that no officer, agent, servant, employee or attorney of Defendant Capital Cove Bancorp LLC or the Funds shall take any action or purport to take any action, in the name of or on behalf of Defendant Capital Cove Bancorp LLC or the Funds, without the written consent of the temporary receiver or order of this Court.
IT IS FURTHER ORDERED that, except by leave of this Court, during the pendency of this receivership, all clients, investors, trust beneficiaries, note holders, creditors, claimants, lessors and
IT IS FURTHER ORDERED that Defendant Capital Cove Bancorp EEC and its subsidiaries, affiliates, officers, agents, servants, employees and attorneys, and the Funds, shall cooperate with and assist the temporary receiver and shall take no action, directly or indirectly, to hinder, obstruct, or otherwise interfere with the temporary receiver or his or her attorneys, accountants, employees or agents, in the conduct of the temporary receiver's duties or to interfere in any manner, directly or indirectly, with the custody, possession, management, or control by the temporary receiver of the funds, assets, collateral, premises, and choses in action described above.
IT IS FURTHER ORDERED that Defendant Capital Cove Bancorp LLC and its subsidiaries and affiliates, shall pay the costs, fees and expenses of the temporary receiver incurred in connection with the performance of his or her duties described in this Order, including the costs and expenses of those persons who may be engaged or employed by the temporary receiver to assist him or her in carrying out his or her duties and obligations. All applications for costs, fees, and expenses for services rendered in connection with the receivership other than routine and necessary business expenses in conducting the receivership, such as salaries, rent, and any and all other reasonable operating expenses, shall be made by application setting forth in reasonable detail the nature of the services and shall be heard by the Court.
IT IS FURTHER ORDERED that no bond shall be required in connection with the appointment of the temporary receiver. Except for an act of gross negligence, the temporary receiver shall not be liable for any loss or damage incurred by any of the defendants, their officers, agents, servants, employees and attorneys or any other person, by reason of any act performed or omitted to be performed by the temporary receiver in connection with the discharge of his or her duties and responsibilities.
IT IS FURTHER ORDERED that representatives of the SEC and any other government agency are authorized to have continuing access to inspect or copy any or all of the corporate books and records and other documents of Defendant Capital Cove Bancorp LLC and the Funds, and continuing access to inspect their funds, property, assets and collateral, wherever located.
IT IS FURTHER ORDERED that the SEC's application for expedited discovery' concerning Defendants, their assets and activities and the Funds, is granted and that, commencing with the time and date of this Order, in lieu of the time periods, notice provisions, and other requirements of Rules 26, 30, 33, 34, 36, and 45 of the Federal Rules of Civil Procedure and the corresponding Local Rules of this Court, discoveiy shall proceed as follows:
(A) Pursuant to Rule 30(a) of the Federal Rules of Civil Procedure, the SEC may take depositions upon oral examination on two days' notice of any such deposition. Depositions may be taken Monday through Saturday. As to the Defendants and their agents, servants, promoters, employees, brokers, associates, and any person who transferred money to or received money from the bank accounts identified above, the SEC may depose such witnesses after serving a deposition notice by facsimile, hand or overnight courier upon such individuals, and without serving a subpoena on such witness. Depositions that have not been signed by the witness may be used for purposes of the hearing on the SEC's application for preliminary injunction;
(B) Pursuant to Rule 33(a) of the Federal Rules of Civil Procedure, each Defendant shall answer the SEC's interrogatories within three days of service of such interrogatories upon each Defendant;
(C) Pursuant to Rule 34(b) of the Federal Rules of Civil Procedure, each Defendant shall produce all documents requested by the SEC within three days of service of such request, with production of the documents made to Amy Jane Longo, U.S. Securities and Exchange Commission, 444 S. Flower Street, Suite 900, Los Angeles, CA 90071, or such person or place as counsel for the SEC may direct in writing;
(D) Pursuant to Rule 36(a) of the Federal Rules of Civil Procedure, each Defendant shall respond to the SEC's requests for admissions within three days of such requests; and
(E) All written responses to the SEC's requests for discovery under the Federal Rules of Civil Procedure shall be delivered by hand or overnight courier to the SEC to the attention of Amy Jane Longo, U.S. Securities and Exchange Commission, 444 S. Flower Street, Suite 900, Los Angeles, CA 90071, or such other place and person as counsel for the SEC may direct in writing.
IT IS FURTHER ORDERED that this Temporary Restraining Order shall expire at
IT IS FURTHER ORDERED that at Any reply papers shall be filed with the Court and delivered to opposing counsel no later than ____ on ____, 2015.
IT IS FURTHER ORDERED that this Temporary Restraining Order shall expire at ____ on ____, 2015 unless for good cause shown it is extended or the parties against whom it is directed consent that it may be extended for a longer period.
IT IS FURTHER ORDERED that at ____ on ____, 2015, or as soon thereafter as the parties may be heard, the Defendants, and each of them, shall appear before the Honorable __________________, Judge of the United States District Court for the Central District of California, to show cause, if there be any, why a preliminary injunction should not be granted. Any declarations, affidavits, points and authorities, or other submissions in support of, or in opposition to, the issuance of such an Order shall be filed with the Court and delivered to the SEC's Los Angeles office and the offices of the Defendants or their attorneys no later than ____ on ____, 2015. Any reply papers shall be filed with the Court and delivered to opposing counsel no later than ____ on ____, 2015. Service of all such papers shall be by electronic mail, facsimile, or personal service.
IT IS FURTHER ORDERED that this Court shall retain jurisdiction over this action for the purpose of implementing and carrying out the terms of all orders and decrees which may be entered herein and to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.
IT IS SO ORDERED.
